Streptomyces erythreus produces a C21 branch-chain fatty acid present as a 14-member lactone in the bisglycosides of the erythromycin family of antibiotic principles. Two oxygen atoms not present in the substrates used by the lactone synthase are found in the final products. One, at C-6 of the lipid is introduced by a cytochrome P450-linked mixed-function oxydase. The second at C-12 appears to be present as a result of a different type of enzymatic activity - a membrane-associated non heme-dependent hydroxylase. Study of both systems is in progress, with emphasis on the P450-linked system. This enzyme is soluble, stable and present in S. Erythreus grown in a simple vegetable medium without deliberate induction. The possibility of autocatalytic induction by the small amounts of substrate (6-deoxyerythronolide B) formed during the fermentation will be studied. The potential of using this hydroxylase system to study the mechanism of acceptance of activated oxygen is a driving force in this program. The acceptor is a conformationally stable complex molecule with a reaction teriary hydrogen atom (at C-6). This distinguishes this acceptor from others known from work with soluble systems (long-chain alkanes and camphor).